The Zacks Analyst Blog Highlights: JPMorgan Chase & Co., Bank of America Corporation, Wells Fargo & Company, Citigroup and Wal-Mart Stores

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Jun 21, 2011, 09:30 ET

CHICAGO, June 21, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Wells Fargo & Company (NYSE: WFC), Citigroup Inc. (NYSE: C) and Wal-Mart Stores Inc. (NYSE: WMT).

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Here are highlights from Monday's Analyst Blog:

Foreclosures Continue to Slow

Last week, data released by RealtyTrac, the leading online marketplace of foreclosure properties, revealed that foreclosure filings in May dropped to the lowest level since 2006. A total of 214,927 properties were issued notices of default, auction or repossession during the month of May, which reflected a decline of 2% from the prior month and 33% from prior-year period.

The recent spate of foreclosure scams has led to constant regulatory inquiry into flawed foreclosure paperwork and procedures, which in turn has compelled the lenders to hold up their actions against defaulting homeowners. The delayed foreclosure processing, along with a persistent housing market slump, has mainly caused foreclosures to slow down.

Further, though the number of foreclosed properties has been steadily declining in the last 16 months, the number of homes remaining unsold has increased in both April and May. This is reflective of a weak demand for homes in the country.

According to RealtyTrac's report, a total of 5 states – California, Florida, Michigan, Arizona and Nevada – accounted for more than 50% of the overall foreclosure activity in the month of May.

The reported month witnessed a greater foreclosure decline in the judicial states, where documents need to be filed with the court, as against the non-judicial states, where no such filing is required. A total of 73,579 properties received foreclosure notices in the judicial states compared with 141,348 properties in the non-judicial states.

Additionally, the first step in the foreclosure process, issuance of default notice, decreased 7% sequentially and 39% year over year to 58,797, marking a 53-month low. However, foreclosure auctions inched up 3% from April but plunged 33% from May 2010 to 89,251 properties. This rise was preceded by 8 consecutive monthly falls in the same. Further, the rate of bank repossessions, the final stage, fell 4% from the prior month and 29% from the prior-year month to 66,879 properties.

Foreclosure activities have been tumbling since mid-2010, when many of the servicers, including JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC) and Ally Financial Inc., had temporarily suspended foreclosures across the country, following the detection of faulty foreclosure paperwork. Flaws in documents resulted primarily from the use of "robo-signers", who sign hundreds of documents everyday without verifying the decisive information.

Following the detection, the U.S. bank regulators, along with the state attorneys general (AGs), geared up to take actions against mortgage servicers such as JPMorgan, BofA, Ally Financial Inc., Wells Fargo & Company (NYSE: WFC) and Citigroup Inc. (NYSE: C).

On June 13, the Office of the Comptroller of the Currency (OCC) said that regulators are about to allow the nation's major banks 30 more days to submit their foreclosure plans to address mortgage servicing malpractices. In April, the OCC had entered into an agreement with 14 major lenders to ensure reimbursement to victims of foreclosure scams. The banks can take time to hire auditors and detect how many foreclosures could have been avoided in the last two years, had the documents not been messed up.

Further, last month, U.S. mega banks decided to pay as much as $5 billion to settle the claims made by the federal and state officials for their mortgage foreclosure malpractices. However, the proposed payment is substantially lower than the amount discussed by the groups involved in negotiations.

Whatever the settlement deal might be, it would definitely take quite long to overcome the foreclosure crisis. We are also optimistic that various corrective measures, if implemented correctly, would surely save us from yet another foreclosure crisis. Most importantly, it would leave a lasting impact on lenders, forcing them to be extra cautious during housing transactions.

Additionally, falling home prices, a weak housing sector, as well as pressure on the lenders and servicers to provide more time to the borrowers to work out a new payment program, will likely lead to further delays in foreclosures. So, this is perhaps not the time to relax and believe that foreclosures will continue to fall. Instead, it would be wise to get prepared for an exceptional rise in foreclosures over the next several months.

Walmart Shrinks for Big Gains

Retail giant Wal-Mart Stores Inc. (NYSE: WMT) buys the idea "small is profitable" and gears up for opening mid-sized Walmart Market stores immediately. Management has also announced that the company plans to open 90 to 100 stores in the year ending in January and 300 by fiscal 2013, up from 185 presently.

These mid-sized Neighborhood markets are more like traditional grocery stores, which enjoys same returns as the supercenters and entails lesser hassles in being approved and constructed.

Wal-Mart is getting even smaller with Wal-Mart Express, an apt way to regain its businesses that was lost to the dollar stores. Wal-Mart, the world's largest retailer, opened its first "Walmart Express" store in Gentry, Arkansas, about six miles from the nearest Wal-Mart supercenter, in early June.

Walmart Express stores, occupying an area of 15,000 square feet, are roughly one-tenth the size of a Walmart supercenter and sell everything from fresh and frozen food to sheets and towels.

Walmart is opening Walmart Express outside of its home state for the first time in the small town of Richfield, North Carolina. Walmart is set to open in the Chatham neighborhood on Chicago's South Side.

The projects are designed to reverse a sales slump in the U.S. that has lasted for eight straight quarters now. Wal-Mart had made some bad decisions in the past few years in the face of recession, and has been trying to reverse situation at its earliest opportunity.

Keeping this in mind, the company has embarked upon an experiment to create smaller sized stores, which would help cut costs and boost profit margins. It has been found that these small stores are more profitable than warehouse-sized shopping centers.

Moreover, continuously declining in-store traffic and stiff competition from dollar chains and drug stores, is forcing the company to scale down its super centers.

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